Polycom Announces Revenues of $353 Million for Fourth Quarter 2012
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http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130123:nBw236420a http://www.businesswire.com/news/home/20130123006420/en * Sequential Revenue Growth in All Major Product Categories SAN JOSE, Calif.--(Business Wire)-- Polycom, Inc. (Nasdaq: PLCM), the global leader in open standards-based unified communication and collaboration (UC&C), today reported financial results for the fourth quarter ended December 31, 2012. Fourth quarter 2012 consolidated net revenues were $353 million, up 5 percent sequentially, growing in all product categories, compared to $335 million for the third quarter of 2012 and down 9 percent year-over-year compared to $386 million for the fourth quarter of 2011. Non-GAAP net income for the fourth quarter of 2012 was $31 million, or 17 cents per diluted share, compared to non-GAAP net income of $17 million or 10 cents per diluted share for the third quarter of 2012, and non-GAAP net income of $68 million, or 38 cents per diluted share for the fourth quarter of 2011. GAAP net income for the fourth quarter of 2012 was $2 million, or 1 cent per diluted share, compared to GAAP net income of $50 million, or 28 cents per diluted share, for the same period last year. All periods presented in this release have been adjusted to reflect the classification of Polycom`s Enterprise Wireless Solutions business as discontinued operations. The reconciliation between GAAP net income and non-GAAP net income is provided in the tables at the end of this release. "Polycom has executed very well, demonstrating clear product leadership during the UC&C market transition in 2012," stated Andrew M. Miller, Polycom President and Chief Executive Officer. "We are excited to begin 2013 with what we believe is the most comprehensive product portfolio in the industry and improved sales and go-to-market capabilities that enable new business models for collaboration, including software, cloud-delivered video, and virtualization." "We are pleased to report sequential revenue growth in all product categories, including UC Platform, which is above a quarter billion dollar per year run rate," continued Eric Brown, Polycom Chief Operating Officer and Chief Financial Officer. "Services revenue also increased both sequentially and year-over-year in line with our increased focus on this area of the business." On a geographic basis, consolidated net revenues from continuing operations for the fourth quarter of 2012 were comprised of: * 50 percent Americas, or $175.2 million, an increase of 2 percent sequentially and a decrease of 3 percent year-over-year; * 26 percent Europe, Middle East, and Africa (EMEA), or $93.4 million, an increase of 19 percent sequentially and a decrease of 10 percent year-over-year; and * 24 percent Asia Pacific, or $84.4 million, a decrease of 2 percent sequentially and a decrease of 18 percent year-over-year. By product line, inclusive of its service component, consolidated net revenues from continuing operations for the fourth quarter of 2012 were comprised of: * UC Group Systems of $238.2 million, an increase of 5 percent sequentially, and a decrease of 8 percent year-over-year; * UC Personal Devices of $46.8 million, an increase of 2 percent both sequentially and year-over-year; and * UC Platform of $68.0 million, an increase of 6 percent sequentially and a decrease of 15 percent year-over-year. In Q4 2012, Polycom generated a total of $66 million in operating cash flow and completed share repurchases of $5 million. Operating cash flow on a trailing 12 month basis was $187 million. Deferred revenue balances increased 2 percent sequentially to $250 million. Q4 2012 Business Highlights * Announced a royalty-free license offering for an interoperable implementation of H.264 Scalable Video Coding (SVC) software technology. * Unveiled a comprehensive set of breakthrough products at our Strategy Day in October, including: * Polycom RealPresence CloudAXIS Suite, a software extension of the Polycom RealPresence Platform for private and public cloud deployments - available in both an enterprise and partner/service provider edition - that enables universal access to enterprise-grade video collaboration to any business (B2B) or consumer (B2C) at the highest quality, reliability, and security * Powerful Polycom RealPresence Platform enhancements, including the industry`s first open standards-based SVC (Scalable Video Coding), with 3X HD multipoint video call capacity for greater scalability, dramatically lower TCO, superior performance, and backwards- and forwards-compatibility to protect customer investments-all available through a software update * Polycom RealPresence Collaboration Server 800s, Virtual Edition, the industry`s first multi-protocol, integrated software MCU that runs on industry-standard servers * Next-generation video endpoints, including new Polycom RealPresence Group Series products, the new ultra-slim Polycom RealPresence VisualEdge Executive Desktop offering, and Polycom RealPresence software for PCs and mobile devices. * Launched Polycom VVX 600 solutions, offering workers a flexible and intuitive phone that integrates seamlessly with popular UC&C productivity applications and Bluetooth headsets for hands-free privacy. Users can also join video conferences via the optional Polycom VVX Camera, which Polycom also unveiled for both Polycom VVX 600 and Polycom VVX 500 business media phones. * Introduced a series of new customer financing options that help free customers from the limitations of quarterly capital expense budgets and allow more organizations to implement UC&C solutions that fully meet their needs. * Announced enhancements to the Company's video content management solutions, including a new cloud-delivered version of the Polycom RealPresence Media Manager and Polycom RSS 4000 v8.5, which help organizations record, stream, manage and view live and on-demand video content quickly, easily and cost-effectively. * Announced the worldwide availability of the Polycom HDX Series 3.1, a software update for the Company's popular HDX video collaboration solution for executive desktops and rooms. Earnings Call Details Polycom will hold a conference call today, January 23, 2013, at 5:00 p.m. EST/2:00 p.m. PST to discuss its fourth quarter financial results. Andrew M. Miller, President and CEO, and Eric Brown, Chief Operating Officer and Chief Financial Officer, will host the call. You may participate by viewing the webcast at www.polycom.com/investors or, for callers in the U.S. and Canada, you may participate by calling 800.707.8704 and for callers outside of the U.S. and Canada, by calling 303.223.4360. The pass code for the call is "Polycom." A replay of the call will also be available at www.polycom.com or, for callers in the U.S. and Canada, at 800.633.8284 and, for callers outside of the U.S. and Canada, at 402.977.9140. The access number for the replay is 21643789. A replay of the call will be available on www.polycom.com for at least three months. Forward Looking Statements and Risk Factors This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding future events, future demand for our products, and the future performance of the Company, including statements regarding the comprehensiveness of our product portfolio and improved sales and go-to-market capabilities that enable new business models for collaboration, and future expectations for continued growth of our UC Platform revenues. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the impact of competition on our product sales and for our customers and partners; the impact of increased competition due to consolidation in our industry or competition from companies that are larger or that have greater resources than we do; potential fluctuations in results and future growth rates; risks associated with global economic conditions and external market factors; the market acceptance of our products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully integrate our acquisitions into our business; possible delays in the development, availability and shipment of new products due to engineering, manufacturing or other delays; increasing costs and differing uses of capital; changes in key personnel that may cause disruption to the business; the impact of restructuring actions; and the impact of global conflicts that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company`s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements. Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed and will be delivered on a when and if available basis. GAAP to non-GAAP Reconciliation To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains, and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom's underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses, or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States. About Polycom Polycom is the global leader in open standards-based unified communications and collaboration (UC&C) solutions for voice and video collaboration, trusted by more than 415,000 customers around the world. Polycom solutions are powered by the Polycom RealPresence Platform, comprehensive software infrastructure and rich APIs that interoperate with the broadest set of communication, business, mobile and cloud applications and devices to deliver secure face-to-face video collaboration in any environment. Polycom and its ecosystem of over 7,000 partners provide truly unified communications solutions that deliver the best user experience, highest multi-vendor interoperability, and lowest TCO Visit www.polycom.com or connect with us on Twitter, Facebook, and LinkedIn to learn how we're pushing the greatness of human collaboration forward. © 2013 Polycom, Inc. All rights reserved. POLYCOM, the Polycom logo, and the names and marks associated with Polycom`s products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners. POLYCOM, INC. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Revenues: Product revenues $ 261,874 $ 303,461 $ 1,042,484 $ 1,138,050 Service revenues 91,152 82,769 350,144 264,139 Total revenues 353,026 386,230 1,392,628 1,402,189 Cost of revenues: Cost of product revenues 109,506 120,906 426,369 439,995 Cost of service revenues 36,704 31,364 142,827 103,930 Total cost of revenues 146,210 152,270 569,196 543,925 Gross profit 206,816 233,960 823,432 858,264 Operating expenses: Sales and marketing 116,312 113,401 464,353 428,829 Research and development 55,085 51,431 208,510 190,322 General and administrative 25,910 20,629 98,285 81,661 Amortization of purchased intangibles 2,512 2,671 9,830 5,542 Restructuring costs 195 4,657 22,024 9,396 Acquisition-related expenses 2,271 1,764 14,064 9,688 Total operating expenses 202,285 194,553 817,066 725,438 Operating income 4,531 39,407 6,366 132,826 Other income (expense), net (858 ) 1,778 (3,868 ) (1,672 ) Income from continuing operations before provision for income taxes 3,673 41,185 2,498 131,154 Provision (benefit) for income taxes 39,081 (4,545 ) 38,056 5,246 Income (loss) from continuing operations (35,408 ) 45,730 (35,558 ) 125,908 Income from operations of discontinued operations, net of taxes 2,178 3,843 9,888 9,906 Gain from sale of discontinued operations, net of taxes 35,425 - 35,425 - Net income $ 2,195 $ 49,573 $ 9,755 $ 135,814 Basic net income (loss) per share: Income (loss) per share from continuing operations $ (0.20 ) $ 0.26 $ (0.20 ) $ 0.71 Income per share from operations of discontinued operations, net of taxes $ 0.01 $ 0.02 $ 0.06 $ 0.06 Gain per share from sale of discontinued operations, net of taxes $ 0.20 $ - $ 0.20 $ - Basic net income per share $ 0.01 $ 0.28 $ 0.06 $ 0.77 Diluted net income (loss) per share: Income (loss) per share from continuing operations $ (0.20 ) $ 0.26 $ (0.20 ) $ 0.69 Income per share from operations of discontinued operations, net of taxes $ 0.01 $ 0.02 $ 0.06 $ 0.05 Gain per share from sale of discontinued operations, net of taxes $ 0.20 $ - $ 0.20 $ - Diluted net income per share $ 0.01 $ 0.28 $ 0.06 $ 0.75 Number of shares used in computation of net income (loss) per share: Basic 175,519 176,729 176,878 176,426 Diluted 175,519 179,331 176,878 181,195 Note: Earnings per share amounts for continuing operations, discontinued operations and net income, as presented above, are calculated individually and may not sum due to rounding differences. As a result of the net loss from continuing operations for the three and twelve month periods ended December 31, 2012, all potentially issuable common shares have been excluded from the diluted shares used in the computation of earnings per share for those periods as their effect is anti-dilutive. POLYCOM, INC. Reconciliation of GAAP to Non-GAAP Net Income (In thousands, except per share amounts) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2012 2011 2012 2011 GAAP net income $ 2,195 $ 49,573 $ 9,755 $ 135,814 Income from operations of discontinued operations, net of tax (2,178 ) (3,843 ) (9,888 ) (9,906 ) Gain from sale of discontinued operations, net of tax (35,425 ) - (35,425 ) - Tax expense on company reorganization 38,836 - 38,836 - Amortization of purchased intangibles 4,421 4,529 17,465 11,201 Restructuring costs 195 4,657 22,024 9,396 Acquisition-related expenses 2,271 1,764 14,064 9,688 Stock-based compensation expense 23,690 18,276 88,761 63,853 Effect of stock-based compensation on warranty rates 128 181 669 546 Severance costs associated with CFO retirement - - 929 - Legal costs associated with the indemnification of a former officer - (87 ) 236 1,552 Impairment (recovery) of an investment in a private company - (421 ) - 79 Benefit related to the resolution of a multi-year tax audit - - - (7,487 ) Income tax effect of other non-GAAP exclusions (3,444 ) (6,696 ) (25,612 ) (20,078 ) Non-GAAP net income $ 30,689 $ 67,933 $ 121,814 $ 194,658 GAAP earnings per share: Basic $ 0.01 $ 0.28 $ 0.06 $ 0.77 Diluted $ 0.01 $ 0.28 $ 0.06 $ 0.75 Non-GAAP earnings per share: Basic $ 0.17 $ 0.38 $ 0.69 $ 1.10 Diluted $ 0.17 $ 0.38 $ 0.68 $ 1.07 Number of shares used in computation of GAAP earnings per share: Basic 175,519 176,729 176,878 176,426 Diluted 175,519 179,331 176,878 181,195 Number of shares used in computation of non-GAAP earnings per share: Basic 175,519 176,729 176,878 176,426 Diluted 177,953 179,331 178,945 181,195 POLYCOM, INC. Condensed Consolidated Balance Sheets (In thousands) (Unaudited) December 31, December 31, 2012 2011 ASSETS Current assets Cash and cash equivalents $ 477,073 $ 375,241 Short-term investments 197,196 159,426 Trade receivables, net 194,654 210,804 Inventories 99,960 93,284 Deferred taxes 48,916 37,282 Prepaid expenses and other current assets 55,454 51,241 Assets held for sale - 67,130 Total current assets 1,073,253 994,408 Property and equipment, net 133,319 126,884 Long-term investments 50,333 56,772 Goodwill and purchased intangibles 608,802 623,121 Deferred taxes 28,406 23,356 Other assets 21,238 20,264 Total assets $ 1,915,351 $ 1,844,805 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 89,983 $ 110,719 Accrued payroll and related liabilities 39,469 38,546 Taxes payable 4,736 - Deferred revenue 158,482 138,486 Other accrued liabilities 63,018 59,288 Liabilities held for sale - 14,119 Total current liabilities 355,688 361,158 Non-current liabilities Deferred revenue 91,061 82,898 Taxes payable 15,598 16,813 Deferred taxes 236 558 Other non-current liabilities 22,079 13,262 Total liabilities 484,662 474,689 Stockholders' equity 1,430,689 1,370,116 Total liabilities and stockholders' equity $ 1,915,351 $ 1,844,805 POLYCOM, INC. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Twelve Months Ended December 31, December 31, 2012 2011 Cash flows from operating activities: Net income $ 9,755 $ 135,814 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 61,586 52,564 Amortization of purchased intangibles 20,318 21,742 Provision for excess and obsolete inventories 6,420 8,567 Provision for doubtful accounts 1,100 - Stock-based compensation expense 89,245 65,262 Impairment of private company investments - 79 Excess tax benefits from stock-based compensation (9,297 ) (13,430 ) Loss on disposals of property and equipment 4,080 1,537 Net gain on sale of discontinued operations (35,425 ) - Tax expense on company reorganization 38,836 - Changes in assets and liabilities, net of the effect of acquisitions and divestitures: Trade receivables 16,582 (63,009 ) Inventories (11,428 ) 2,545 Deferred taxes (15,933 ) (12,446 ) Prepaid expenses and other assets (8,835 ) (3,190 ) Accounts payable (22,901 ) 22,816 Taxes payable 5,123 13,496 Other accrued liabilities 37,754 67,298 Net cash provided by operating activities 186,980 299,645 Cash flows from investing activities: Purchases of property and equipment (67,270 ) (69,279 ) Purchases of investments (312,631 ) (372,567 ) Proceeds from sale of investments 52,286 41,461 Proceeds from maturities of investments 229,211 326,332 Net cash received from sale of discontinued operations 50,411 - Net cash paid in purchase acquisitions (4,583 ) (163,630 ) Net cash used in investing activities (52,576 ) (237,683 ) Cash flows from financing activities: Proceeds from issuance of common stock under employee option and stock purchase plans 25,832 40,798 Repurchase and retirement of common stock (67,901 ) (64,937 ) Excess tax benefits from stock-based compensation 9,297 13,430 Net cash used in financing activities (32,772 ) (10,709 ) Net increase in cash and cash equivalents 101,632 51,253 Cash and cash equivalents, beginning of period 375,441 324,188 Cash and cash equivalents, end of period $ 477,073 $ 375,441 These Condensed Consolidated Statements of Cash Flows include combined cash flows of continuing and discontinued operations. The end of period cash and cash equivalents balance for December 31, 2011 includes $200 of cash included within "Assets held for sale" in the condensed consolidated balance sheets. POLYCOM, INC. Reconciliations of GAAP Measures to Non-GAAP Measures (In thousands) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2012 2011 2012 2011 GAAP cost of revenues used in inventory turns $ 146,210 $ 152,270 $ 569,196 $ 543,925 Stock-based compensation expense (2,532 ) (1,591 ) (10,204 ) (6,267 ) Effect of stock-based compensation on warranty rates (128 ) (181 ) (669 ) (546 ) Amortization of purchased intangibles (1,909 ) (1,858 ) (7,635 ) (5,659 ) Non-GAAP cost of revenues used in inventory turns $ 141,641 $ 148,640 $ 550,688 $ 531,453 GAAP gross profit $ 206,816 $ 233,960 $ 823,432 $ 858,264 Stock-based compensation expense 2,532 1,591 10,204 6,267 Effect of stock-based compensation on warranty rates 128 181 669 546 Amortization of purchased intangibles 1,909 1,858 7,635 5,659 Non-GAAP gross profit $ 211,385 $ 237,590 $ 841,940 $ 870,736 Non-GAAP gross margin 59.9 % 61.5 % 60.5 % 62.1 % GAAP sales and marketing expense $ 116,312 $ 113,401 $ 464,353 $ 428,829 Stock-based compensation expense (9,722 ) (8,131 ) (36,791 ) (27,022 ) Non-GAAP sales and marketing expense $ 106,590 $ 105,270 $ 427,562 $ 401,807 Non-GAAP sales and marketing expense as percent of revenues 30.2 % 27.3 % 30.7 % 28.7 % GAAP research and development expense $ 55,085 $ 51,431 $ 208,510 $ 190,322 Stock-based compensation expense (5,387 ) (4,228 ) (20,195 ) (14,850 ) Non-GAAP research and development expense $ 49,698 $ 47,203 $ 188,315 $ 175,472 Non-GAAP research and development expense as percent of revenues 14.1 % 12.2 % 13.5 % 12.5 % GAAP general and administrative expense $ 25,910 $ 20,629 $ 98,285 $ 81,661 Stock-based compensation expense (6,049 ) (4,326 ) (21,571 ) (15,714 ) Severance costs associated with CFO retirement - - (929 ) - Legal costs associated with the indemnification of a former officer - 87 (236 ) (1,552 ) Non-GAAP general and administrative expense $ 19,861 $ 16,390 $ 75,549 $ 64,395 Non-GAAP general and administrative expense as percent of revenues 5.6 % 4.2 % 5.4 % 4.6 % GAAP total operating expenses $ 202,285 $ 194,553 $ 817,066 $ 725,438 Stock-based compensation expense (21,158 ) (16,685 ) (78,557 ) (57,586 ) Amortization of purchased intangibles (2,512 ) (2,671 ) (9,830 ) (5,542 ) Restructuring costs (195 ) (4,657 ) (22,024 ) (9,396 ) Acquisition-related expenses (2,271 ) (1,764 ) (14,064 ) (9,688 ) Severance costs associated with CFO retirement - - (929 ) - Legal costs associated with the indemnification of a former officer - 87 (236 ) (1,552 ) Non-GAAP total operating expenses $ 176,149 $ 168,863 $ 691,426 $ 641,674 Non-GAAP total operating expenses as percent of revenues 49.9 % 43.7 % 49.6 % 45.8 % GAAP operating income (loss) $ 4,531 $ 39,407 $ 6,366 $ 132,826 Stock-based compensation expense 23,690 18,276 88,761 63,853 Effect of stock-based compensation on warranty rates 128 181 669 546 Amortization of purchased intangibles 4,421 4,529 17,465 11,201 Restructuring costs 195 4,657 22,024 9,396 Acquisition-related expenses 2,271 1,764 14,064 9,688 Severance costs associated with CFO retirement - - 929 - Legal costs associated with the indemnification of a former officer - (87 ) 236 1,552 Non-GAAP operating income $ 35,236 $ 68,727 $ 150,514 $ 229,062 Non-GAAP operating margin 10.0 % 17.8 % 10.8 % 16.3 % POLYCOM, INC. Summary of Stock-Based Compensation Expense (In thousands) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2012 2011 2012 2011 Cost of sales - product $ 873 $ 707 $ 3,593 $ 2,501 Cost of sales - service 1,659 884 6,611 3,766 Stock-based compensation expense in cost of sales 2,532 1,591 10,204 6,267 Sales and marketing 9,722 8,131 36,791 27,022 Research and development 5,387 4,228 20,195 14,850 General and administrative 6,049 4,326 21,571 15,714 Stock-based compensation expense in operating expenses 21,158 16,685 78,557 57,586 Total stock-based compensation expense $ 23,690 $ 18,276 $ 88,761 $ 63,853 Polycom, Inc. Laura Graves, 408-586-4271 (Investors) firstname.lastname@example.org Shawn Dainas, 408-586-3768 (Press) email@example.com Copyright Business Wire 2013
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